Oil price volatility and stock returns: Evidence from three oil‐price wars
Mushtaq Hussain Khan,
Junaid Ahmed,
Mazhar Mughal and
Imtiaz Hussain Khan
International Journal of Finance & Economics, 2023, vol. 28, issue 3, 3162-3182
Abstract:
This study examines how crude oil price volatility affected the stock returns of major global oil and gas corporations during three major oil‐price wars that took place between October 1991 and June 2020. Episodes considered include the 1998 Saudi Arabia – Venezuela war, the 2014–2016 conflict and the 2020 Saudi Arabia – Russia war in a time of unprecedented crisis caused by the COVID‐19 pandemic. The persistence of volatility in oil prices during times of specific oil‐price wars is captured through generalized autoregressive conditional heteroscedasticity (GARCH) model while the leverage effect is tested using the threshold generalized autoregressive conditional heteroscedasticity (T‐GARCH) model. Moreover, a vector autoregressive (VAR) model is employed to consider the relationship between oil price shocks and stock returns of oil and gas corporations. Our findings reveal a significant evidence for volatility persistence and leverage effects in oil price during the three oil‐price wars. These findings are consistent for WTI as well as Brent crude oil specifications. Though the persistence of volatility is similar to that of the previous two oil‐price wars, the 2020 Saudi Arabia – Russia oil‐price war has higher volatility spikes than the previous two wars. Besides, oil price shocks have a significant and positive effect on the returns of oil and gas companies. These findings provide investors information on how volatility in global oil prices is also sensitive to irregular events such as price wars between oil producers. This information can be important for economic agents contemplating shorter hedges by managing risks during times of high volatility.
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)
Downloads: (external link)
https://doi.org/10.1002/ijfe.2588
Related works:
Working Paper: Oil Price Volatility and Stock Returns: Evidence from Three Oil-price Wars (2020) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:wly:ijfiec:v:28:y:2023:i:3:p:3162-3182
Ordering information: This journal article can be ordered from
http://jws-edcv.wile ... PRINT_ISSN=1076-9307
Access Statistics for this article
International Journal of Finance & Economics is currently edited by Mark P. Taylor, Keith Cuthbertson and Michael P. Dooley
More articles in International Journal of Finance & Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().